Singapore Piles Into Private Equity, Infrastructure

Tom Burroughes

16 November 2018

Singapore's regulator plans to put as much as $5 billion into the funds of private equity and infrastructure projects to bolster these market segments in the Asian city-state as it competes with rival hubs such as Hong Kong.

Separately, the is consulting on how to build on the idea of fintech "sandboxes" - aka laboratories - and accelerate tests of new ideas.

In its private equity/infrastucture drive, MAS said its private markets programme, or PMP, "will fund PE and infrastructure fund managers who are committed to either deepening their existing presence or establishing a significant presence in Singapore".

With private equity, for example, attracting strong wealth management inflows, lured by recent robust returns, jurisdictions such as Singapore are keen to attract practitioners. There have been some concerns, however. Research firm Preqin has reported that there is more than $1.0 trillion of unused capital capacity, aka "dry powder", in the private equity space. This publication has heard from private banks about their concerns over stretched valuations in the asset class.

The Singapore regulator has also unveiled a "large-scale deal making platform", called MATCH, which curates and matches promising new Southeast Asia enterprises with private capital. MATCH has already generated more than 17,000 matches between 380 participating investors and 840 enterprises, MAS said in a statement.

"Private markets will be a key source of financing. The PMP will enhance our private markets ecosystem and strengthen the value proposition of Singapore’s asset management industry as a gateway for investors to tap the region’s growth opportunities," Jacqueline Loh, deputy managing director of MAS, said.

Sandboxes
MAS this week released a consultation paper on the creation of "pre-defined sandboxes", known as Sandbox Express, to run alongside an existing facility set up in 2016. The plan is to accelerate experiments in low-risk financial areas without having to go through existing made-to-measure approvals and applications.

The watchdog said the The Sandbox Express is suitable for activities where the risks are generally low, or well understood and could be reasonably contained within the specific pre-defined sandbox. For example, it includes sandboxes specifically pre-defined for insurance broking, recognised market operators and remittance businesses.

Jurisdictions have created these laboratories to test out new ideas in financial technology, such as artificial intelligence, data analytics, distributed ledgers and machine learning.
Singapore's authorities have made a big play of being one of the most tech-savvy financial jurisdictions in the world. At DBS, the locally-listed bank, digital tech is seen as a core growth strategy.

(Editorial comment: It will be interesting to see how much detail MAS gives in future about the internal rates of return on its private equity and infrastructure developments. As a state body, MAS will need to be transparent, in a way that some private investors do not have to be, about how well its portfolio performs. Of course, whether a state entity, and what is effectively a central bank, as MAS is, should be playing directly in fields such as private equity at all is a matter for debate. What is clear is that Singapore's authorities want to flag up how the jurisdiction is a good place for this type of business, and keep an eye on what rivals might be up to. As the story here notes, the private equity market is arguably at a hot point in terms of valuations and un-called capital.)